Fixed costs and variable costs

 Fixed Cost

* Fixed cost is referred to as that cost which does not register a change with an increase or decrease in the quantity of goods produced by a firm

* It is time dependent and changes after a certain time period

* Fixed costs are incurred irrespective of any units are produced or not

* Fixed cost decreases with increase in number of units produced

* Higher production results in reduced costs which increases profits

Examples: Rent, Salaries, Property taxes 

Variable Cost

* Variable cost is referred to as that type of cost that will show variations as per the changes in the levels of production.

* It is volume dependent and changes based on volume produced

* Variable costs are incurred as and when any units are produced

* Variable cost remains same irrespective of number of units produced

* There is no impact on profit with the level of production

Examples: Labour cost, cost of raw materials, sales commissions

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